Tim Hayden has attended more sports events than he can remember. But while the fan in him took in the action on the field, the entrepreneur noticed something in the stands: Fans pay good money to see a game--but they often miss a lot of the action. That trip to the concession stand to buy a hot dog. Waiting in line for the restroom. A cranky kid. A mind-wandering moment.

This got Hayden thinking. What if fans could rent a wireless hand-held device, one that would allow them to order snacks without leaving their seats, call up team and player stats, interact with other fans, and view instant replays? Hayden soon realized this was more than an intriguing idea--it was a business. In 2002, he took the plunge: He founded Vivid Sky, which would market a hand-held device called the SkyBOX to sports franchises.

Over the next three years, Vivid Sky designed a prototype and identified a manufacturer. Hayden talked with management at a number of Major League Baseball teams and several NFL and NBA teams, and secured agreements with some of them to test the SkyBOX in their stadiums and arenas. The only thing that's missing is money. Hayden figures he needs $1 million in seed money to build the prototype and test it, plus another $4.8 million over the next two years to install the system in three baseball stadiums, two basketball arenas, and one hockey venue. According to Vivid Sky's business plan, the company will make money several ways--rent-ing the devices to fans, offering pay-per-view content such as fantasy league and video games, and charging for advertising on the devices. If all goes according to plan, Vivid Sky's revenue should reach $31 million by 2008, Hayden says.

But what's the company worth today? Hayden puts the value at between $2.5 million and $4 million, based on his conversa-tions with potential investors, lawyers, and accountants. But he knows that figure is an esti-mate at best.

Len Green's assessment

Green began by scanning Vivid Sky's financials and doing some homework on the industry. It didn't take long: Vivid Sky isn't operational yet, and there are few truly comparable businesses out there. That meant the project would be a gut call, based largely on Green's intuitive sense of the company's chances of success.

He scheduled two interviews with Hayden and prepared scores of questions--about Vivid Sky's product, Hayden's background, potential competitors, how he planned to build a management team. His impression of Hayden: "I thought he was bright, articulate, and enthusiastic." But some of what he heard was troubling.

For one thing, Hayden had kept his part-time teaching job at St. Louis University--perhaps, Green worried, he didn't have enough "skin in the game." Hayden also seemed untested.

Then Green found himself at a New York Giants football game. Sitting in a luxury box at the Meadowlands, he thought about Vivid Sky and realized he happily would have paid more for a seat that came with a SkyBOX. "Real sports enthusiasts are probably willing to pay," he says. Back at the office, he continued his analysis. On the plus side, he saw "a great potential for utilization--not only by individuals, but stadiums, advertisers, teams, leagues, luxury box owners, etc." He also credited Vivid Sky with being first to market. The company could be ripe for takeover by a larger company like ESPN. There's also potential for profitable joint ventures. But Green had concerns: Was the SkyBOX rugged enough? Was the proposed $15 to $20 rental fee too high?

At the very least, Green believed, the company was worth $160,000--the amount Hayden had invested in the venture so far. But that seemed low. Hayden's seed-round prospectus offered investors 25% of the company for $1 million, which meant that if Hayden's projections were correct, the value of the company would be $4 million. Green felt that Hayden's calculations made sense. In fact, considering the intellectual property that would be created along the way, he thought that Hayden was being too conservative. Green added up such intangibles and decided they were worth about $1 million. Vivid Sky's final number: $5 million. "That's what I'd be willing to pay," he says.

Mary O'Connor's assessment

For a number-oriented person like O'Connor, start-ups like Vivid Sky pose a challenge: "No or minimal track record. No or limited profitability. Unproven technology to be sold to a hopefully large but unproven market. Unproven or slightly proven management team." And Vivid Sky seemed like an extreme case. "It's still looking for the hardest prize of all--the seed capital," she says.

O'Connor started off by interviewing Hayden, digging deep into Vivid Sky's business. With start-ups, she pays close attention to how long it's taking for the idea to catch on, which she sees as a proxy for how risky a potential investment will be. "If a company is looking for financing for two years," she says, "either they're going to the wrong people or maybe it's not a realizable idea." That sparked some serious concerns about Vivid Sky. "Tim has a good group of team owners that are interested; I was surprised that no one in that group was willing to fund it." she says. Next, O'Connor turned her attention to Hayden's business plan--particularly, how long he figured it would take to turn a profit, a key concern for a venture capital investor. "I thought he was a bit optimistic," she says.

Interview over, O'Connor began researching the industry. She looked for potential competitors as a reality check on Hayden's assessment. "I think the competition is deeper and from more sources than Tim acknowledged," she says. Several sports venues, for example, have older wired technology that might be adaptable to the uses that Hayden envisions. Then, she looked at the market for hand-held devices in general, and saw plenty of competition there, as well.

O'Connor sat down to do her calculations convinced that Vivid Sky was an extremely risky proposition. So risky that, if the company doesn't land its seed capital, she put the value of the company at zero.

And if it does find funding? Thinking like a venture capitalist, O'Connor put Vivid Sky's current value at the amount an investor would have to spend now to get a 35% to 50% return upon cashing out. Since no real numbers were available, O'Connor used the ones in Hayden's business plan--but only after giving them "a haircut." She doubled the amount of time it would take for Vivid Sky to turn a profit, from three years to six years. That meant the company would need $1.9 million in seed funding to get started--not $1 million, as Hayden had estimated. And that would be Vivid Sky's current value--$1.9 million. "I tend to be conservative," she says. "My function as an appraiser is often to help people keep their head on straight."

Tim Hayden's response

Guess which number Hayden prefers? "We like Len's valuation a lot," he says.

Beyond preferring the higher number, Hayden says that Green's thinking helped him develop a clearer picture of a potential Vivid Sky investor as "a sports fan at heart and an entrepreneur who has been successful in the past." The experience also led Hayden to reassess his pitch to potential investors. Based on Green's concerns about the sturdiness of the SkyBOX device, for instance, Hayden now places greater emphasis on the device's ability to take punishment. "We tell them it can be submerged up to 30 minutes, can be dropped from 15 feet multiple times," he says. One investor tested the assertion by flinging the device at an exposed brick wall. "It survived easily," Hayden says. And the investor was impressed.

But Hayden's also been thinking about one of O'Connor's main concerns--the amount of time it's taking to secure his seed capital. "I understand that our window of opportunity is only going to last one to two years," he says. He admits he made a mistake in 2004 by focusing on investors in St. Louis. It's since become clear that local investors are far more conservative than those in tech hotbeds on the coasts. In September, he broadened his search, but he'd already lost nearly a year.